Introduction 1.1 Industry environment Before a business started, we must know the industry of our business. In this case, we are searching information for cosmetic industry.
The business industry environment consists of 3 layers. The internal Environment, Industry Environment, and Macro Environment. According to Michael Porter in 1997, industry is defined as “a group of companies offering products or services that are close substitutes for each other, that is, products or services that satisfy the same basic customers’ needs.” And in marketing, the term market refers to the group of consumer or organization that is interested in the product, has the buying power to purchase that product, and is permitted by law to purchase that product.
In other words, Industry is the supplier and market are the buyers. 1.2 Organic Cosmetic industry in Australia The Australia Cosmetics Industry covers stores primarily engaged in retailing or wholesaling cosmetic products. They can be categorized as 6 main types which include skin and sun care, hair care, deodorants, make up, color cosmetic and fragrances. While the professional products (e.
g. cosmetics studios) and personal care services (hair salons, cosmetics studios etc.) are out of scope as they are targeted different marketing segments. In recent years cosmetics have shown significant growth, due to an increased need for personal expression and individuality. The Australian cosmetics products market has been broadly segmented by product types (hair care products, skin care products, oral care products, color cosmetic products, fragrances, soaps and shower gels, sun care products and others) and distribution channel (direct selling, supermarkets, specialty stores, e-commerce, departmental stores, pharmacies and others).
Below is a mapping of cosmetic industry.The Organic Cosmetics industry primarily distribute organic cosmetics. The industry includes manufacturers (that sell directly to retailers or consumers) and traditional wholesalers. Revenue generated by manufacturers selling products to wholesalers is excluded from the industry. It can be categorized as organic skincare products (segment includes like creams, cleansers, lotions and body oils), organic hair-care products, and organic makeup cosmetics. In addition, organic cosmetics products are retrieved from organically grown ingredients and processing it naturally without any addition of chemical. They are typically marketed as natural and non-harmful. Mokosh fills a niche in the industry and that they compete in the organic cosmetic industry.
Mokosh itself only deals in the sale to retailers and wholesalers of their product as manufacturing/packaging is all outsourced.1.3 Size of the IndustryThe organic cosmetics industry has grown strongly over the past five years. As it shows in the diagram, from year 2014 to 2017, the total market size increased by $214 million. Increasing consumer awareness about the health benefits of using industry products and growing concerns about the dangers of chemical compounds in traditional cosmetics have driven industry growth. Australians average annual spend on cosmetics is $146, compared to $139 in the U.
S. and $223 in Japan. ? In 2015, Australia’s total cosmetics market is estimated at US$3.4 billion, with over 70% of all consumption imported. Through 2018 there are good prospects for Australia’s personal care and cosmetics markets, with the overall market conservatively estimated to grow by four percent per annum in 2017 and 2018. Growth in Australia’s consumption and imports of these products had slowed in 2013 through 2015, due to a decline in commodity prices and a devaluation of the Australian dollar which also provided an opportunity for more Australian firms to enter the market.
However, Australia’s GDP is now projected to grow at 2.5% in 2016 and 3% in 2017, fueling consumer spending of both imported and domestically produced products. ? Across all product price segments and sectors there is increasing demand for “natural” products that prominently feature essential oils, organic, and biodynamic ingredients. ? In 2013-2014, industry revenue is expected to grow by 2.9% to $3.6 billion. This compares with revenue of $3.1 billion in 2008-09, equating to annualized growth of 3.
2% over the past five years. ? In addition, according to a recent report, ‘The Future of the Skincare Market in Australia to 2017,’ ‘Facial Care’ is the run-away leader in the industry, with the ‘Body Care’ sector a distant second. The fastest growing category in Australia’s skincare market is forecast to be the ‘Hand Care’ sector, which is predicted to grow at a CAGR of 5.42% through to 2017.
Within the market, manufacturers invested the most in advertising skin care products, which represented a 39% share of spending, or A$44 million. 2. Macro Environmental AnalysisMacro environment is the broadest layer of business industry environment. In order to do macro environment analysis, I used the PESTLE framework model, consist of Political, Economic, Social, Technological, Environmental and Legal factors to analyze the macro environmental factors that affect the organic cosmetic industry in Australia. The PESTEL analysis focuses on the external forces that affect the organization. 2.1 Political factorsPolitical factors usually related to stability of political government and the attitudes of political bodies and movements.
Political focus mainly on attitudes and approaches. They consist of health, tax policies, legislative bills and safety laws, and government stability.? The Australian Government supports the negotiation of comprehensive Free Trade Agreements (FTAs) that are consistent with the World Trade Organization (WTO) rules and guidelines and which complement and reinforce the multilateral trading system. As a result of the Free Trade Agreement between the United States and Australia, the general import duty on cosmetics and toiletries decreased on January 1, 2005, from five percent to zero.
FTAs promote stronger trade and commercial ties between participating countries and open up opportunities for Australian exporters and investors to expand their business into key markets. For Mokosh, it is beneficial when they seek to gain a foothold in potential or expanding markets. More importantly is that it will wider economic benefits to Mokosh as it could use the FTAs to expand the market share both in Australia and international, because they have more opportunities and wider market to promote and sell their organic cosmetic products.? Furthermore, tax rate has a major impact on the industries.
For example, an increase in tax will result in an immediate rippling effect and it will affect the cost structure of the business and the cash position. The diagram shows a comparison of corporation tax of the year from 2015 to 2018. (ATO,2018)Corporation tax be defined as taxation payable by companies. From the above diagram you can see that main rate of corporation tax has been 30% in the years. There hasn’t been any increase or decrees in the rate in those years. This will affect the cosmetic industry positively. This will encourage the current cosmetic manufactures and they will be more stable in the market.2.
2 Economic factorsEconomic Factors relates to unemployment, inflation, taxes and recession. It also may cost of raw material (for example: steel, petrol, and energy), economic growth rates, interest rates and monetary policies. Economic factors mainly affect the purchasing power of customers. The more customer demand for the product the more profit to the organization, at the same time if there are no customers demand it’s going to affect the organization in a negative manner. So economic factors are very important external factor that affect the cosmetic industry.? A report by Grand View Research, Inc. reveals that in Australia, consumers show a tendency to expend a little more on their cosmetic products, using them to the last drop.
As global real GDP growth was estimated at 3.9% for the year 2017, and the Australia’s real GDP growth rate remained around 3% (World Bank, 2017). Unfortunately, the trend of Australia’s real GDP growth rate in the future years still lower than global which indicated that Australia’s economic growth rate will be a decelerating trend. Thus, the economic slowdown in Australia could lead to a decrease in the consumption of cosmetic products, as in the tough times, people focus more on the essential needs, and they might cut down on their spending on cosmetic products.? By the contrast, the growth rate in emerging market and developing countries is increasing rapidly, as it is clearly showing in the line chart that emerging market growth rate reached 4.9% in 2017. And it predicted continue increase to the year 2022.
Which means that people wage level will remain steady and allow a greater purchasing power. Furthermore, the developing country are endorsed with a huge population, more especially in China and Brazil. Plus, their fast-economic development, in the future, if the organic cosmetic industry in Australia, like Mokosh could try to build a business trade relationship with these countries, they will own more potential customers, not only boost products sales, but also raise brand awareness in the international market. 2.3 Socio-demographic factorsSocial factor are the areas that involve the attitudes and beliefs a population have. These factors include career attitudes, population growth, health consciousness, age distribution, and the demography, lifestyle, cultural aspects of the consumers.
These factors usually have direct effect on customer drives which may influence their needs and wants.? In 2020 Australia’s median age will be 38.2 as opposed to 35.4 at the start of the millennium, with more 65-year old than one year old. The median age is currently 37 and increased by close to five years over the last two decades. The percentage of the population aged 65 and up has gone from eight percent in the 1970s to 14% now. In the 1980s women made up 35 percent of the workforce.
Women now represent 45% and workforce participation rates have increased for both men and women. Australia’s ageing population combined with the fact that consumers are staying longer in the workforce has been a major driver in the demand for cosmetics as their major customers are young and middle-aged people. ? Moreover, with the changing in society, men care acceptance appeared nowadays.
The gentleman style, groomed and detailed from clothing to accessories, lifestyle and travel, is becoming increasingly popular among the male population and has great potential to impact the market in the coming years. Some gestures like shaving with a brush, the use of skincare and haircare products have entered the daily life of a growing share of the market, not only related to the more mature population, who can share them for historical habit.? Consumers today are well-informed as well as connected and seek to use product that are less harmful in terms of chemical composition of a product with increasingly concerned about the environmentally. Over the last few years there has been a considerable shift in consumer preference towards organic or chemical-free products. (Shugar, Greg 2017). Thus, companies are often known to market these products devoid of any chemicals as organic products, which better meet the consumer requirements as people this day are becoming more health conscious. That is why the chance of organic cosmetics products sell will be good in the future.2.
4 Technological factorsTechnological can impact the way we market our products. Technological factors include new ways of producing, distributing, and communicating new goods and/or services. Company who adapt the fastest to new technology can easily beat competitor in the industry/market. ? Australia has the fourth highest B2C ecommerce sales rates in the Asia Pacific Region behind China, Japan and Korea. Australia also offers the highest internet penetration rate in the region. Online retailing is valued at AU$18 billion and represents approximately seven percent of total retail spending (AU$260 billion).
Australians spent around AU$1.17 billion on online cosmetic purchases last year (6.5 percent of total online retailing sales). It is estimated that B2C ecommerce will grow by other eight percent in 2017. ? Social media is a big driver in the promotion of B2C transactions.
It is also a major driver in traditional retail sales. Facebook, Instagram and Youtube are among the platforms and apps being used to create brand awareness to keep customers update about new products and inform them. As these developments give rise to new communication platforms and choices. Digital or social media helps companies reach out to their customers, generate awareness related to the products and attract new potential customers, which may further fuel cosmetics demand over the forecast period.
Hence technology is used fully to align and compete in the market of cosmetics. ? Technological advancement in the cosmetic market combined with development of innovative products providing effective results and ease of use are contributing to the growth of this industry. The increasing demand for anti-ageing products and growing concern for the use of organic skin care products are the major factors driving the industry.